ArmInfo. The monetary policy of Armenia's Central Bank (CBA) has reached "a important critical point," CBA Chairman Martyn Galstyan stated at a meeting of the Standing Committee on Financial-Credit and Budgetary Affairs, Parliament of Armenia, as he spoke of the inflationary trends in Armenia.
The CBA Board plans to make a decision on the key rate.
"After two years of high inflation, it is now much lower, even lower than the 4% target. This may it was 1.3%," Mr Galstyan said.
Inflation was reduced due to such factors as lower prices for imported goods, including food, as well as for fuel. On the other hand, the prices for some services (hairdressing, repair, etc) remain high after remaining stable for decades. One of the causes of price reduction is supply, particularly, the resumed supplies after the COVID period. On the other hand, high prices for services are due to higher demand.
"As you know, in its inflation targeting the CBA is focusing on demand-pull inflation management. Yes, our policy of raising the refinancing rate is aimed at curbing demand. On the other hand, economy has excessive demand. That is, our economic growth and demand will remain much higher than our potential," Mr Galstyan said.
Last December, 8.3% inflation was recorded in Armenia, the annual core inflation being 9.5%, as against 7.7% and 7.3% respectively in December 21. According to the statistical data, the 8.3% inflation was due to a 9.9% rise in food prices and a 7.1% rise in nonfood prices, with a 7.2% rise in services prices. In 2021, the 12.5% rise in food prices and an 8% rise in nonfood prices was accompanied by a 1.9% rise in service prices.
The CBA raised the refinancing rate to 10.75% on December 13, 2022, which proved a record after the 10.5% of 2015. The CBA raised the refinancing rate last year: in February, from 7.75% to 8%, in March, up to 9.25%, in August, up to 9.5%, in September, up 10.5%, in November, from 10% to 10.5%. From 2021 to December 13, 2022, the CBA raised the refinancing rate 12 times - from 5.25% up to 10.75%. in previous years, the historical maximum of the refinancing rate was recorded on February 10, 2015 - from 9.5% up to 10.5%.
This May, the CBA pointed out a slight upward trend in the average market interest rates. After sideways throughout 2022, this May the rates slowly went up - 10.19% to 10.39%. ArmInfo financial experts believe that, if the CBA pays attention to this insignificant trend, the key rate could reduce by 0.25-05 percent to signal the undesirability of raising the cost of money to the market.
